SEC NEWS DIGEST

Enforcement Proceedings

The Securities and Exchange Commission today charged a California-based hedge fund analyst with insider trading in advance of a merger of two technology companies based on nonpublic information he received from his friend who was an executive at one of the companies.

The SEC also charged the executive and another trader in the $29 million insider trading scheme.

The SEC alleges that Matthew Teeple of San Clemente, Calif., was tipped in advance of a July 2008 announcement that Foundry Networks Inc. had agreed to be acquired by Brocade Communication Systems Inc. for approximately $3 billion. Teeple’s source was Foundry’s chief information officer David Riley, a friend who he had previously given investment advice. Teeple then caused the San Francisco-based hedge fund advisory firm where he works to buy Foundry shares in large quantities in the days leading up to the public announcement, and the hedge funds managed by the firm reaped millions of dollars in profits when Foundry’s stock value increased upon the news. Teeple also tipped a Denver-based investment professional John Johnson who he befriended through a previous working relationship, and Johnson made illegal trades based on the nonpublic information. Riley also tipped Teeple in advance of at least two other major announcements by Foundry, and Teeple’s firm traded on the nonpublic information to make profits or avoid losses.

“David Riley was entrusted with Foundry’s most valuable secrets, but betrayed his company and set off an explosive chain reaction of illegal tips from friend to friend for illicit profits,” said George S. Canellos, Acting Director of the SEC’s Division of Enforcement.

Sanjay Wadhwa, Senior Associate Director of the SEC’s New York Regional Office, added, “Company insiders who reveal confidential information and the traders who trade on it can expect robust scrutiny from the SEC. The charges against Riley and Teeple are a cautionary tale for those considering insider trading that should make them think twice.”

In a separate action, the U.S. Attorney’s Office for the Southern District of New York today announced criminal charges against Teeple, Riley, and Johnson.

According to the SEC’s complaint filed in federal court in Manhattan, Riley tipped Teeple on the morning of July 16 about Brocade’s impending acquisition of Foundry. Teeple immediately shared this information with colleagues at his firm as well as Johnson and several others who purchased Foundry stock, often within minutes of communicating with Teeple. Foundry stock climbed approximately 32 percent after the public announcement of the merger on July 21.

The SEC alleges that Riley, who lives in San Jose, Calif., continued to provide material nonpublic information to Teeple about key events throughout the process of Foundry’s acquisition by Brocade, which was not fully completed until Dec. 18, 2008. Teeple’s firm continued to profitably trade Foundry securities based on this inside information. For example, Riley tipped Teeple in advance of an October 24 announcement that Foundry’s shareholder vote to approve the acquisition would be delayed “given recent developments related to the transaction.” Earlier in 2008, Riley tipped Teeple in advance of Foundry’s April 11 earnings forecast so Teeple’s firm could profitably trade in advance of the announcement.

The SEC’s complaint charges Teeple, Riley, and Johnson with violating Section 17(a) of the Securities Act of 1933 and Section 10(b) of the Securities Exchange Act of 1934 and Rule 10b-5. The complaint seeks a final judgment ordering them to disgorge their ill-gotten gains plus prejudgment interest, ordering them to pay financial penalties, and permanently enjoining them from future violations of these provisions of the federal securities laws. The complaint also seeks to permanently prohibit Riley from serving as an officer or director of a public company.

The SEC’s investigation, which is continuing, has been conducted by Michael Holland, William Edwards, and Joseph Sansone of the Market Abuse Unit in New York as well as Christopher Ferrante and Melissa Coppola in the New York Regional Office. The case has been supervised by Sanjay Wadhwa. The SEC appreciates the assistance of the U.S. Attorney’s Office for the Southern District of New York, Federal Bureau of Investigation, and Financial Industry Regulatory Authority (FINRA).

Since October 2009, the SEC has charged more than 430 individuals and entities with insider trading. The defendants in these cases are alleged to have made approximately $940 million in illicit profits and losses avoided. (Press Rel. 2013-47)

CORRECTIONS

A summary entitled SEC v. Timothy J. Roth, et al., included in Issue 2013-55 of the Digest on March 22, 2013, should have appeared as follows:

SEC v. Timothy J. Roth, et al.

The Securities and Exchange Commission announced that on March 21, 2013, the Honorable Michael M. Mihm of the United States District Court for the Central District of Illinois entered a judgment against Timothy J. Roth ("Roth"), a former investment adviser who misappropriated millions of dollars from the accounts of his advisory clients. The judgment permanently enjoins Roth from violating the antifraud provisions of the federal securities laws. Roth consented to the judgment.

The SEC filed an emergency against Roth on March 21, 2011. On that same day, the Court issued an order freezing Roth’s assets and those of several companies he controlled. On March 31, 2011, the Court appointed a Receiver over Roth’s assets and those of the companies he controlled. The SEC’s complaint alleged that Roth worked for Comprehensive Capital Management, Inc. ("Comprehensive"), a New Jersey-based registered investment adviser. The SEC’s complaint alleged that from October 2010 through February 2011, Roth stole more than $6 million worth of mutual fund shares from several deferred compensation plans (“Plans”) for whom he provided investment advice. Roth's theft of client assets was later determined to have been over $16 million. The SEC alleged that Roth, who worked out of Comprehensive’s office near Urbana, Illinois, secretly caused his victims’ mutual fund shares to be transferred to an account under his control, even though no such transfer had been requested or authorized by the clients. The SEC alleges that after selling the clients’ shares, Roth funneled the cash proceeds to various accounts and companies under his control or for his benefit. According to the SEC’s complaint, at the time he was engaging in his scheme, Roth did not tell the clients about the transfers. As a result of his conduct, the SEC’s complaint charged Roth with violations of Section 10(b) of the Securities Exchange Act of 1934, and Rule 10b-5 thereunder, and with aiding and abetting violations of Sections 206(1), 206(2), and 206(4) of the Investment Advisers Act of 1940, and Rule 206(4)-2 thereunder.

In a parallel criminal proceeding arising out of the same facts that were the subject of the SEC's civil action against him, Roth pled guilty in October 2011 to one count of mail fraud and one count of money laundering. On January 31, 2013, Roth was sentenced to 151 months of incarceration and was ordered to pay $16,151,964 in restitution to his victims. Based on Roth’s conviction and the $16 million in restitution ordered against him, the Court has also entered an order granting the Commission's motion to dismiss its monetary claims against Roth. [SEC v. Timothy J. Roth, et al., Civil Action No. 11-cv-02079 (C.D. Ill.)] LR-22656)

INVESTMENT COMPANY ACT RELEASES

Neuberger Berman ETF Trust and Neuberger Berman Management LLC

A notice has been issued giving interested persons until April 19, 2013, to request a hearing on an application filed by Neuberger Berman ETF Trust and Neuberger Berman Management, LLC, for an order to permit: (a) series of certain actively managed open-end management investment companies to issue shares (Shares) redeemable in large aggregations only (Creation Units); (b) secondary market transactions in Shares to occur at negotiated market prices; (c) certain series to pay redemption proceeds, under certain circumstances, more than seven days from the tender of Shares for redemption; (d) certain affiliated persons of the series to deposit securities into, and receive securities from, the series in connection with the purchase and redemption of Creation Units; and (e) certain registered management investment companies and unit investment trusts outside of the same group of investment companies as the series to acquire Shares. (Rel. IC-30436 – March 25)

SELF-REGULATORY ORGANIZATIONS

Immediate Effectiveness of Proposed Rule Changes

ICE Clear Credit LLC filed a proposed rule change (SR-ICC-2013-02) under Section 19(b)(1) of the Securities Exchange Act of 1934, which became effective upon filing, to describe procedures for reporting off-facility swaps to a registered Swap Data Repository. Publication is expected in the Federal Register during the week of March 25, 2013. (Rel. 34-69205)

A proposed rule change filed by NASDAQ OMX BX, Inc. (SR-BX-2013-025) to amend Exchange Rule 4120 has become effective pursuant to Section 19(b)(3)(A) of the Securities Exchange Act of 1934. Publication is expected in the Federal Register during the week of March 25, 2013. (Rel. 34-69219)

A proposed rule change filed by Chicago Board Options Exchange, Incorporated relating to complex orders and mini-options (SR-CBOE-2013-040) has become effective pursuant to Section 19(b)(3)(A) of the Securities Exchange Act of 1934. Publication is expected in the Federal Register during the week of March 25, 2013. (Rel. 34-69220)

A proposed rule change filed by the New York Stock Exchange LLC deleting Commentary .01 to NYSE Rule 2B, which provides an exception related to the Exchange’s equity ownership interest in BIDS Holdings L.P., (SR-NYSE-2013-022) has become effective under Section 19(b)(3)(A) of the Securities Exchange Act. Publication is expected in the Federal Register during the week of March 25, 2013. (Rel. 34-69225)

A proposed rule change filed by BATS Exchange, Inc. related to fees for use of BATS Exchange, Inc. (SR-BATS-2013-018) has become effective pursuant to Section 19(b)(3)(A) of the Securities Exchange Act of 1934. Publication is expected in the Federal Register during the week of March 25, 2013. (Rel. 34-69226)

A proposed rule change filed by Chicago Board Options Exchange, Incorporated relating to Exchange trading days and hours of business and trading halts (SR-CBOE-2013-035) has become effective pursuant to Section 19(b)(2) of the Securities Exchange Act of 1934. Publication is expected in the Federal Register during the week of March 25, 2013. (Rel. 34-69227)

Approval of Proposed Rule Changes

The Commission approved a proposed rule change submitted by The NASDAQ Stock Market LLC (SR-NASDAQ-2012-090) pursuant to Rule 19b-4 under the Securities Exchange Act of 1934 amending Rule 4626—Limitation of Liability. Publication is expected in the Federal Register during the week of March 25, 2013. (Rel. 34-69216)

The Commission approved a proposed rule change submitted by NASDAQ OMX PHLX LLC (SR-Phlx-2013-15) pursuant to Rule 19b-4 under the Securities Exchange Act of 1934 for the permanent approval of a pilot program to permit PSX to accept inbound orders routed by NASDAQ Execution Services LLC from the BX Equities Market. Publication is expected in the Federal Register during the week of March 25, 2013. (Rel. 34-69229)

The Commission approved a proposed rule change submitted by NASDAQ OMX BX, Inc. (SR-BX-2013-013) pursuant to Rule 19b-4 under the Securities Exchange Act of 1934 for the permanent approval of a pilot program to receive inbound orders routed by NASDAQ Execution Services LLC from PSX. Publication is expected in the Federal Register during the week of March 25, 2013. (Rel. 34-69232)

The Commission approved a proposed rule change submitted by The NASDAQ Stock Market LLC (“NASDAQ”) (SR-NASDAQ-2013-028) pursuant to Rule 19b-4 under the Securities Exchange Act of 1934 for the permanent approval of a Pilot Program to permit NASDAQ to accept inbound orders routed by NASDAQ Execution Services LLC from the BX Equities Market and PSX. Publication is expected in the Federal Register during the week of March 25, 2013. (Rel. 34-69233)

Proposed Rule Change

Miami International Securities Exchange LLC filed a proposed rule change (SR-MIAX-2013-15) relating to Limit Up Limit Down functionality. Publication is expected in the Federal Register during the week of March 25, 2013. (Rel. 34-69234)

SECURITIES ACT REGISTRATIONS

The following registration statements have been filed with the SEC under the Securities Act of 1933. The reported information appears as follows: Form, Name, Address and Phone Number (if available) of the issuer of the security; Title and the number and/or face amount of the securities being offered; Name of the managing underwriter or depositor (if applicable); File number and date filed; Assigned Branch; and a designation if the statement is a New Issue.

Amendments to the Registrant's Code of Ethics, or Waiver of a Provision of the Code of Ethics

5.06

Change in Shell Company Status

6.01

ABS Informational and Computational Material.

6.02

Change of Servicer or Trustee.

6.03

Change in Credit Enhancement or Other External Support.

6.04

Failure to Make a Required Distribution.

6.05

Securities Act Updating Disclosure.

7.01

Regulation FD Disclosure

8.01

Other Events

9.01

Financial Statements and Exhibits

8-K reports may be viewed in person in the Commission's Public Reference Branch at 100 F Street, N.E., Washington, D.C. To obtain paper copies, please refer to information on the Commission's Web site at http://www.sec.gov/answers/publicdocs.htm. In most cases, you can view and download this information by using the search function located at http://www.sec.gov/edgar/searchedgar/companysearch.html.